[India Today]

Published date: 15th Sep 1982

Sentimentality rarely intrudes in­ to shareholders’ meetings, but this one was different. Over 3,000 had gathered in the incongruous setting of a Calcutta cathedral compound for ITC Ltd’s 71st annual general meeting, on August 26. And dominating the stage, flanked by the other directors, out-going Chairman Ajit Narain Haksar was making a public spectacle of himself.

Beginning his last address to the shareholders with com­ posure, his resonant baritone filling the vast pandal, Haksar summed up 14 years of path­breaking corporate steward­ ship. But before long, the senti­mentality of the parting consumed a man otherwise as tough as nails. Breaking down repeatedly, often unable to continue, Haksar barely managed to get through his half-hour address before collapsing into his chair, turning away from the hushed crowd to bury his face in a handkerchief

Honorary Post: The assembled gathering was no less moved. Shareholder after shareholder ran to the nearest microphone to demand that Haksar should not leave. And by the end of the day, they had had their way: a resolution was Haksar insisted he looked forward to retiring next January, when he turns 58, but finally consented to accepting the honorary post.
The handsome honour, without precedent in any professionally-run Indian company, only underscored the measure of Haksar’s achievements since becoming chairman in 1968 of the then lmperial Tobacco Company. Taking charge of a flabby, inbred, foreign-owned organisation struggling to hold on to its market share in a non-priority industry, Haksar has charted a course that is already corporate legend.

Imperial Tobacco became Indian Tobacco, the change in name following from Haksar’s fierce nationalism and his cajoling the company’s foreign principals into Indianising shareholding. “I told them my country came before my company,” says Haksar, recalling a memorable meeting with the directors of Btitish American Tobacco Company soon after he became chairman. “And that control of the company’s operations would have to be in India.”,

There soon followed another change of name, to ITC, signifying this time the ambitious and far-sighted diversification from a semi-stagnant, highly-taxed tobacco industry to hotels, fisheries, exports, paper boards and much else. In the process, the company has held on to its leadership in tobacco; its rapidly growing hotels division has quickly outstripped much older rival chains; its printing and packaging division has become the largest converter in the printing industry; and Bhadrachalam Paperboards Ltd, which ITC promoted, has the highest efficiency rating in the paper boards industry, with a capacity utilisation of 115 per cent. There is probably no other professional chairman of a company who has made the same kind of fundamental contribution to his company.
Says K.N. Randheria who was a senior ITC official till 1979: “For an organisation which for over 50 years had been a single­ product single-business company, diversification on such a radical scale called for skills and abilities of an exceptional level.” Adds S.B. Aibara, till recently vice-chairman of ITC., and now corporate affairs counsellor: “Under Haksar, a stagnant company suddenly sprang to life, and became vibrant and . dynamic. The change achieved in 14 years is incredible. In 1968, no one would have thought this was possible.”

Managerial Revolution: But Haksar’s contribution to ITC has been more than the sum total of the individual changes he pushed through. Armed with an MBA from the Harvard Business School, and a faith in management science and market research that only caused problems in a conservative company, Haksar nevertheless took over as the company’s first Indian chairman and proceeded to stamp his personality on one of the country’s largest companies. He gave what was a “very pucca” company the philosophy of meshing its own growth with national needs, and then proceeded to bring about a minor managerial revolution, transforming hide-bound executives concerned with their specialist tasks into managers who thought as businessmen. Says Randheria: “I have not seen any other company in which professionals have been made into entrepreneurs in the way Haksar has what he calls the proneurial style.”

While setting the new direction, dictating the pace and dominating the company’s thought processes and actions, Haksar has nevertheless built a management team with strength all the way down. Says Santanu Ray, who was vice-chairman of ITC till he left in 1977: “The structure that has been built in ITC is very very strong, and professionalism is of a very high order.” The result is a company which, as Haksar says, was once “sufficient unto itself, alienated from the environment,” but is now aggressively outward-looking, quick to spot opportunities and home in on them, and ready to build on the base he has created
In his first address to shareholders in 1969, Haksar asked them to “prepare for the challenge of the future …(for the company) to play its part in the economic development of the country.” Looking back on the strategy he adopted, Haksar says: “We identified the country’s needs as generating employment, earning foreign exchange, developing core sector industry, and using natural resources in a proper manner. Then we assessed our own strengths and weaknesses, and harmonised the country’s needs with our abilities.”

The move into hotels came because the company had a vast store of marketing expertise and consumer servicing skills; and the hotels earned foreign exchange while being employment-intensive. The move into paper boards broke new ground in a field where no one had cared to invest for over a decade, while helping to use natural wood resources and easing a shortage. Exports became a major priority in the drive to earn foreign exchange, and forays were made into garment exports, fisheries for foreign markets, and exports of a number of other items; foreign exchange earnings have risen from Rs 25 lakh to around Rs 60 crore.
“There were many moments of anxiety,” recalls Jagdish Narain Sapru, the chairman-designate who will succeed Haksar next January as chairman. “We were undertaking the diversification when the cigarette operation was under great pressure because of steadily increasing taxes. Margins were getting squeezed, and the new projects had their gestation periods. But cigarettes successfully carried the weight of the diversification. It was not an easy task, but we have pulled through.”
Surviving the transition was a challenge that brought out the best in Haksar. Though cigarette margins getting narrowed, he launched a major productivity drive, worked with the unions to achieve unstinted cooperation for modernization, the installing of computers, and for unprecedented levels of productivity-in return for handsome pay packets.

Combining corporate objectives with social responsibility, ITC also moved into carpet exports in an effort to boost the income of weavers in Uttar Pradesh’s Shahjahanpur. Says Haksar: “A whole family used to work on a loom and make about Rs 200 a month. We moved in, gave them training, improved the quality of the product, provided the weavers with wool, and sold the carpets abroad. The weavers’ in­ come rose dramatically, to between Rs 1,800 and Rs 2,000 per month for a family.”

Failures: Nevertheless, there were the failures as well: marine fishing, for one. Started boldly in yet another bid to earn foreign exchange through shrimp exports, ITC soon ran into government restrictions, a falling market, and what Haksar admits were management failures. Eventually, the company had to pull out of the line altogether, and is now in the process of selling off its trawlers. Yet other ventures, such as garment exports, have simply not taken off.
In a number of the ventures, profits are still small. Bhadrachalam Paperboards is still to declare a dividend, severely restricted in its financial performance by being excluded from an excise concession scheme, and by the Andhra Pradesh Government’s inability to cough up the promised sales tax loans. The leaf tobacco export operations are equally under pressure, and Haksar says the company has to virtually subsidise exports. Carpet exports have slowed down because the German mark is depressed. Cigarettes themselves remain barely profitable, and the company has been forced to take massive deposits from cigarette dealers in order to shore up its position : income from investment of these deposits accounted for half the pre-tax profit of Rs 16.9 crore by the Rs 589 crore company.
The financial performance, even in Haksar’s farewell year, would have looked pretty grim without such buttressing of profitability. Another drawback is that Haksar’s growth strategy has not permitted ITC to take advantage of officially permitted tax write-offs. So, unlike other growing companies, a hefty chunk of lTC profits goes straight to the-Government as tax. To top it all, some major industrial houses-Modis, Goenkas and Dalmias-have acquired the other large cigarette companies, and have given a new edge to the competition for the smoker’s preference.

Take-off: For all these continuing uncertainties, Haksar sees the company at a take-off stage. “You must see today’s position in relation to that in 1968, when the company had its back to the wall,” he says. “Today, most of the diversification projects have matured, and the company is in a position to take on major capital investments, to mobilise the required resources and move into an era of rapid growth.”

One major venture round the comer is aimed at giving Brooke Bond a run for its money. In collaboration with the Lon<ton­ based Jokai group, which owns tea estates in Assam, ITC plans a major entry into the packaged tea market. Other projects on the drawing-boards include cement, micro­ computers, data processing, developing alternative energy sources, and the export of management services. “We expect to invest around Rs 300 crore in the next IO years,” says Jagdish Sapru.
Nevertheless, with Haksar bowing out, the company is certainly at the crossroads again. For 14 years, he has shaped its vision, moulded it as an extension of his own personality, using a managerial style that he frankly admits is authoritarian. To an ex­traordinary degree, the ITC today is what Haksar has made it. How then will the company fare without Haksar?

The answer to that question has not been helped by the fact that Sapru, his successor, happens to be Haksar’s brother – in-law. Many in the company, and even more outside, insist that Sapru was no more than the second-best choice, the better candidate having been Ramesh Sarin who, however, anticipated Sapru’s succession and left to lead Voltas, where he has already set a blistering pace-almost as if to prove a point. Santanu Ray says: “Sarin is a genuine loss, and I know he quit because he knew Sapru would get the chairmanship.”
Consensus Choice: Haksar, however, insists that Sapru was the consensus choice made by the directors. “I talked to each director individually, and asked him who he thought would be the best man for the job. I got a 99 per cent consensus.” And Samir Ghosh, who is now next to Sapru in the hierarchy, says: “It is one of the happiest transitions I have known.”
One corporate observer referred to Sapru as “another Rajiv Gandhi”, but in most circles he is accepted as a man who has won his spurs. Most observers also agree that Haksar is leaving behind a top team strong enough to face any challenge. Said one company insider: “This, I think, is the greatest thing about Haksar. By the sheer strength of his professional and entrepreneurial skill, he became the dominant figure. But he always took the care to let others grow under him.”
But however well or badly the company fares in future, Haksar’s imprint will endure as the man who took charge at a critical point, set a new direction and steered a middle-aged giant into renewed growth.

‘ITC Is Now Set For A Take-off’

Ajit Narain Haksar, 57, has had the sort of career others dream of: the second Indian to get an MBA from the Harvard Business School, almost half his34 years in ITC have been as either director or chair­ man. Joining the company when officers were evaluated by such yardsticks as their ability to play golf, he stubbornly refused to play the game till he had become chairman. Equally assiduously staying away from cocktail parties ( “It is more important to have a clear head in the morning”), he ascribes his success to a “Kenuine wish to succeed and plain bloody hard work”. Haksar took time off between two board meetings to spend three hours in a wide-ranging interview. Excerpts:
On his major success in ITC: I have been able to change the fundamental direction of a single-product company that was almost wholly foreign-owned into an Indian, multi-product company that meshes with the national environment.
On his strategy for change: We identified the country’s needs … Then we assessed our own strengths and weaknesses, and harmonised the country’s needs with our abilities. The aim was to discharge the social responsibility that we felt we had.
On his management style: Management styles should be based on the country’s culture and ethos. This is true of Japan, where they have not imposed an alien industrial culture on society. In India, the family is the basic social unit, which is why you find so many successful family-owned businesses.

It is a one man company to the extent that I was able to initiate and promote the change of direction
The management style in India needs to be benevolently authoritarian, pro­ vided that people can grow under you. But you can’t impose basic decisions. Through discussion and argument, basic decisions should emerge.

On whether he has made ITC into a one-man company: Yes, it is a one-man company to the extent that I was able to initiate and promote the change of direction..In this I had to be both courageous and forthright. It has been a prodigious task, but it has also been a very very close team operation. No single man can achieve what has been done. Today ITC’s top team is stronger than it has even been.

On the future of ITC: I think it is now set for a take-off. Today, most of the diversification projects- have matured, and the company is in a position to take on major capital investments. In our perspective for the 1980s, we are thinking of moving into cement, electronics, energy, and going abroad in a major way.
On the task facing his successor: He will have to ask himself one question: what is the one fundamental contribution he can make to the company during his term as chairman.

On making a career in tobacco: I have not had a moment’s regret. I think the anxieties about’ the hazards of smok­ing are over-played. The average per capita consumption in India is less than IO cigarettes per month. I think these charges about multinational corporations pushing cigarettes in the Third World are unfounded.
On his future plans: I’d like to stay active, but without the anxieties and tensions of accountability and the competitiveness of life. I might do some writing, on my 34 years in ITC, and some social service.